Crypto-scam under U.S. Commodity Futures Trading Commission’s [CFTC] purview
A cryptocurrency scam falls under the jurisdiction of the commodity regulator of the United States, the Commodity Futures Trading Commission (CFTC), as ruled by a federal district court judge, as reported by Finance Feeds on Wednesday.
Judge Rya W. Zobel of the Massachusetts District Court sided with the CFTC ruling that virtual currencies are commodities and hence, they fall under the purview of the regulatory body. The CFTC accused the crypto-scheme “My Big Coin Pay Inc.” of engaging in fraudulent practices in the state of Nevada.
The CFTC had sued the company’s founder Randall Carter, along with other defendants, for violating the Commodity Exchange Act (CEA) and CFTC-enforced regulations that aim to prevent frauds during the sale of virtual currencies. Carter and the other defendants’ main argument is that My Big Coin (MBC) falls under virtual currencies and not ‘commodities’ and hence, is not under the oversight of the CFTC.
As per the allegations of the CFTC, Carter and MBC are defrauding customers by providing them with false information, baseless claims and omitting pertinent facts in order for them to buy the cryptocurrency. MBC has said that the company was “backed by gold” and the crypto could be used anywhere the MasterCard was accepted and was listed on several crypto trading platforms.
The defendants were also charged with fluctuating the prices of MBC to reflect an actual virtual currency in the market. The victims, who obtained more than $6 million from the scheme, would purchase MBC and view their account balance via the company’s website but “could not trade their MBC or withdraw funds.”
As defined by the CEA, a commodity is a host of specifically mentioned agricultural products as well as “all other goods and articles…and all services rights and interests…in which contracts for future delivery are presently or in the future dealt in.”
Judge Zobel, in her ruling, placed both MBC and Bitcoin under the realm of virtual currencies in which “contracts for future delivery are …presently dealt in.”
“Here, the amended complaint alleges that My Big Coin is a virtual currency and it is undisputed that there is futures trading in virtual currencies (specifically involving Bitcoin). That is sufficient, especially at the pleading stage, for plaintiff to allege that My Big Coin is a ‘commodity’ under the Act,” Zobel stated.
This precedent for this ruling was set by an earlier case from March of this year, in which Jack B. Weinstein, a New York district judge, passed a ruling which stated that the authority of the CFTC allows it to regulate the malicious conduct of another crypto-scam from a firm called CabbageTech Corp. This ruling included Bitcoin under the regulation of CFTC which barred CabbageTech Corp from continuing operations.